Mention the significant changes taking place in the money markets of India since mideighties.

Mention the significant changes taking place in the money markets of India since mideighties. 

Ans. Following changes have taken place in money market since mid-eighties. 

(i) In 1988, with an objective of imparting liquidity to financial instruments and help in development of secondary markets for such institutions Discount and Finance House of India (DFHI) was set up as a money market institution jointly by RBI, Public Sector Banks and Financial Institutions. Later, RBI disinvested its shareholding and DFHI has been taken over by SBI and is called SBI DFHI Ltd. 

(ii) At present there is large range of financial instruments. For increasing money market instruments’ range, in 1988-89, commercial papers, certificates of deposits, interbank participation certificates were introduced.

(iii) With an objective of enabling price discovery, since 1988, the interest ceiling on call money has been freed. Firstly, DFHI was freed and then it was completely withdrawn. Currently all interest rates are by and large determined by the demand and supply forces. 

(iv) Institutions similar to DFHI were allowed to set up and they are called primary dealers. At present there are about 16 primary dealers in private and public sector. Primary dealers play an active role in money market. They participate actively in the auctions of treasury bills and government bonds. They buy stock and retail government debt.